Is literacy shared within households? Theory and evidence for Bangladesh

A member of a collective-action households may or may not share the benefits of literacy with others in that household; the shared gains from doing so may well be offset by a shift in the balance of power within the family. Using household survey data for Bangladesh, we find strong external effects of education on individual earnings, Holding a range of personal attributes constant, an illiterate adult earns significantly more in the non-farm economy when living in a family with at least one literate member. These effects are strongest, and most robust, for women. Omitted-variable bias cannot be ruled out but would also be consistent with an intra-household externality of literacy. (C) 2002 Elsevier Science B.V. All rights reserved.